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Mental health visits are cut by one-fourth when providers are paid a fixed rate per patient

Mental health providers who are paid a fixed rate per patient, regardless of the patient's diagnosis, by a specialty mental health managed care organization cut back on the number of times they see each of their patients by 20 to 25 percent. Mental health professionals are even more likely to respond to these financial arrangements by cutting back mental health services when such arrangements constitute a large share of their total revenue, according to Meredith B. Rosenthal, Ph.D., of the Harvard School of Public Health. Dr. Rosenthal's research was supported by the Agency for Healthcare Research and Quality (HS09660).

For the study, Dr. Rosenthal examined data from the Managed Behavioral Health Organization on claims, medical encounters, and eligibility before 1995, when the case-rate system was phased in, and in 1996. She examined the difference in outpatient visits per patient episode for providers paid a lump sum per case (case-rate system) with the visits per patient for providers paid on a fee-for-service FFS basis (control group). Early adopters of the case-rate system (October 1995) showed a steady decline in visits relative to the FFS providers throughout the fall of 1995, which leveled out in March of 1996. The late adopters started their decline about 2 months after the early adopters and took until February 1996 to equalize their visit rates to the early adopters.

Overall, there was a 20 to 25 percent decline in outpatient mental health visits due to the reimbursement change to the case-rate system relative to the FFS payment. Group practices and those with more intense utilization review programs reduced visits significantly more than other providers. In contrast, larger provider organizations and those with more fee-for-service revenue reduced visits significantly less than other providers. More studies are needed to determine if this reduction in visits may be evidence of cost-shifting (use of prescription drugs and primary care visits to substitute for outpatient therapy) rather than cost reduction.

See "Risk sharing and the supply of mental health services," by Dr. Rosenthal, in the Journal of Health Economics 19, pp. 1047-1065, 2000.

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